Customer as Co-Creator of Value : Technology in Banking

8/14/2019 Customer as Co-Creator of Value : Technology in Banking

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National Seminar on"CREATING AND DELIVERING VALUE FOR CUSTOMERSCREATING AND DELIVERING VALUE FOR CUSTOMERS"

Organized bySchool of Management StudiesCochin University of Science and Technology

Kochi 682022, INDIAMarch 27 - 28, 2009

CONSUMER AS CO-CREATOR OF VALUE:CONSUMER AS CO-CREATOR OF VALUE:

CROSSING THE TECHNOLOGY HURDLECROSSING THE TECHNOLOGY HURDLE

Prof. Chowdari PrasadProfessor of Finance & Registrar, Alliance Business School

Bangalore 560 068, Email: [email protected]

andVamshi Krishna Arumbaka

PGP (Marketing), Alliance Business SchoolBangalore 560 068, Email: [email protected]

Consumer as co-creator of value:Crossing the technology hurdle


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TECHNOLOGY IN INDIAN BANKING


ALPMs and Back Office Computerisation

Need to improve Customer Service

Reconciliation / Union Problems

Advent of PC in 1980s Competition and Reforms

Introduction of computerization

Clearing Houses, ATMs, Electronic Fund Transfers,

BANKNET, SWIFT, e-Mail, Credit Cards, Online Banking,Tele- Banking


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COMMITTEES ON COMPUTERISATION OF BANKSIN INDIA - 1982-1995

Working Group to consider feasibility of introducing MICR /

OCR Technology for Cheque processing (1982), Convenor : Dr

Y B Damle, Advisor, Management Services Department, RBI

Committee on Mechanisation in the Banking Industry (1984),

Chairman : Dr C Rangarajan, Deputy Governor, Reserve Bank

of India

Committees on Communication Network for Banks and SWIFT

implementation (1987), Chairman : Shri TNA Iyer, Executive

Director, RBI



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COMMITTEES ON COMPUTERISATION OF BANKSIN INDIA - 1982-1995 continued

Committee on Computerisation in Banks (1988), Chairman :

Dr C Rangarajan, Deputy Governor, RBI

Committee on Technology Issues relating to Payments

System, Cheque Clearing and Securities System in theBanking Industry, (1994), Chairman: Shri W S Saraf,

Executive Director, Reserve Bank of India

Committee on proposing Electronics Funds Transfer and

Electronics Payments (1995), Chairperson: Smt K S Shere,

Principal Legal Adviser, Reserve Bank of India



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LITERATURE REVIEW

Ostlund (1974)extended Rogers(1971) seminal work on diffusion inidentifying risk as influential to the adoption process. Diffusion studies foundthat adopters are more innovative, less risk averse, perceive an innovation

Parasuraman (2000) - optimism and innovativeness are drivers oftechnology readiness, while discomfort and insecurity are inhibitors. If

consumers are not ready to be an internet banking user, they are likely toexpress discomfort and insecurity

Mary Modahl(2001), Forrester Research, impact of the Internet on business,developed a concept called "Technographics," Ranked computer users by theircomfort level with technology and how likely they are to use the Internet:Early Adopters, Mainstream Users and Laggards

Financial services' researchers, such as Black et al(2002). and Gerrard andCunningham(2003), Theory of diffusion and internet banking, Internetbanking is perceived: More convenient and more compatible with theadopter's lifestyle or more complex and requiring a higher level of PC skills



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ADVANTAGES OF INTERNET BANKINGADVANTAGES OF INTERNET BANKING

Improve customer access, convenience

Facilitate the offering of more services

Increase customer satisfaction and loyalty

Attract new customers easily

Provide services offered by competitors

Reduce customer attrition Reduces the time, cost and effort in the interaction



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ADVANTAGES OF INTERNET BANKINGADVANTAGES OF INTERNET BANKINGContiConti

Cost Per Transaction (US $)

Type Branch Cheque Phone ATM PC Internet

Cost Per

Transaction

1.07 0.95 0.45 0.27 0/015 0.01

Furst, Lang & Nolle Report



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Price Water Coopers reporton Indian Banks: use of IT

Far behind the global scenario

Only 46% being spent on IT for business continuity

Huge investments needed 55% - 27% - 18%

Managing & retaining good clients, optimize costs, beat competition

Banks should take up automation: centralized networks, 24*7services, reduce manpower, CBS, CRM

The Financial Express - 24th

March, 2009

INDIAN SCENARIO INDIAN SCENARIO Banks & ITBanks & IT



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V-SAT based Financial Network for banks

Data warehousing & Datamining

Publishes a Journal on IT in Banking

Web based training for executives

INdian FInancial NETwork(INFINET)

Financial Networks and Applications

Electronic Payments and Settlement Systems

Security Technologies for the Financial Sector

Technology Based Education, Training and Development

Financial Information Systems and Business Intelligence

INDIAN SCENARIOINDIAN SCENARIO IDRBT, IDRBT, Hyderabad-1996Hyderabad-1996

Institute for Development and Research in Banking TechnologyInstitute for Development and Research in Banking Technology



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INDIAN SCENARIO:INDIAN SCENARIO:STATISTICS - 2009STATISTICS - 2009

http://www.bulletin.rbi.org.in



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INDIAN SCENARIO:INDIAN SCENARIO:STATISTICS - 2009STATISTICS - 2009

http://www.bulletin.rbi.org.in



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INDIAN SCENARIO INDIAN SCENARIO IT PenetrationIT Penetration

Year Population Users % penetration

1998 1,094,870,677 1,400,000 0.10%

1999 1,094,870,677 2,800,000 0.30%

2000 1,094,870,677 5,500,000 0.50%

2001 1,094,870,677 7,000,000 0.70%

2002 1,094,870,677 16,500,000 1.60%

2003 1,094,870,677 22,500,000 2.10%

2004 1,094,870,677 39,200,000 3.60%

2005 1,112,225,812 50,600,000 4.50%

2006 1,112,225,812 40,000,000 3.60%

2007 1,129,667,528 42,000,000 3.70%

2008 1,147,995,898 81,000,000 7.10%http://www.internetworldstats.com



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The Technology Readiness Index (TRI) of Parasuraman:

Optimism: the degree to which people with a positive view oftechnology believe it offers increased control, flexibility andefficiency in their lives

Innovativeness: the degree to which people are technologicalpioneers and thought leaders

Discomfort: the degree to which people perceive a lack ofcontrol over technology and feel overwhelmed by it, and

Insecurity: the degree to which people distrust technology andare skeptical of its ability to work properly

HURDLES FOR ADOPTIONHURDLES FOR ADOPTION



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Key components of security concerns:

Authentication: The assurance of identity of the person ina deal

Authorization: A party doing a transaction is authorizedto do so

Privacy: The confidentiality of data and informationrelating to any deal

Data integrity: Assurance that the data has not been

altered Non-repudiation: A party to the deal cannot deny that it

originated the communication or data

HURDLES FOR ADOPTIONHURDLES FOR ADOPTION



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SUGGESTIONS:

Remove lack of human interaction

Address pricing concerns Hole-in-the-wall(Sugata Mitra)

Need to shift or perish Cost reduction: almost 100 times cheaper

Increased customer participation

Self service 24*7, Anytime Anywhere Banking

Divide and Rule

CROSSINGCROSSING HURDLES FOR ADOPTIONHURDLES FOR ADOPTION



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Much will depend on the capability to leap frog to thestate-of-the-art payment and settlement systems.

Given the high rate of technology absorption witnessedin the recent past in our region, there is reason to be

optimistic that the challenges will be met successful

YV Reddy, Governor RBI

Speaking atInstitute for Development and Research inInstitute for Development and Research in

Banking TechnologyBanking Technology



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CONCLUSIONCONCLUSION

Choice is made

Huge effort & cost

New business model

Take this to public Need for push

Change willingly or forcible

Many hurdles but not difficult

Include customer for progress

Cost reduction +

Better service +Co-creation ofvalue =

IncreasedLoyalty



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Thank YouThank You

Reduced costs for bank, better user experience and

freedom for consumer make it feasible

Modhal in Now or Never


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Customer as Co-Creator of Value : Technology in Banking

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